Coming Soon to Your Screen: T-Commerce

Consumers may hate the banners, crawls, and logos that clutter the bottom of their TV screens, but they're about to see a lot more of it. Comcast (CMCSA), Time Warner (TWX), Cox Communications, and other U.S. cable and satellite providers this year are introducing technologies that let them blast viewers with interactive pop-up ads flogging DVD boxed sets of Gossip Girl, mutual fund prospectuses, and myriad other products.

Cable companies have created a consortium called Canoe Ventures, which is retrofitting millions of digital cable boxes with software that lets advertisers send on-screen pitches. Bravo, USA, History, and about a dozen other channels have signed up for the service. Rovi (ROVI), the leading provider of on-screen program guides, has developed its own T-commerce technology and signed up major networks including NBC and Fox. Samsung, Sony (SNE), and other television makers plan to offer similar services on Web-connected TVs. And satellite operators Dish Network (DISH) and DirectTV (DTV) are creating their own systems, which should be available late this year.

Adopting so-called T-commerce could create a windfall for cable companies. "We're pretty sure we're going to see a massive increase in responses to ads," says Canoe Ventures' Chief Executive Officer David Verklin. "With two clicks of your remote control, this stuff is in your mailbox five days later." Researcher In-Stat estimates that as much as 3 percent of viewers will click the buy button, making T-commerce sales potentially worth about $1.5 billion annually.

True, T-commerce efforts to date haven't been huge successes. TiVo (TIVO) boxes deliver interactive pop-ups, though so far they've been used mostly as a way for viewers to request brochures or other information. British Sky Broadcasting has had T-commerce for a decade, but most of the $325 million in annual revenue comes from gamblers placing bets on sporting events, according to In-Stat.

U.S. media companies think they'll be successful this time around because Americans are now accustomed to online shopping. And Canoe's offering, with 30 million households by year-end, has the scale they need to make the effort worthwhile. Five companies including Honda, Kimberly-Clark (KMB), and Fidelity Investments have signed up with Canoe to test the system with everything from free samples to polling. Ultimately, users may get targeted pitches tailored to their viewing habits, though that could take years, says Michael Fitzsimmons, CEO of Delivery Agent, which is working with T-commerce systems to provide billing. "The optimal time for presenting sales offers," he says, "is for shows you're watching or about to watch."

The bottom line: TV viewers can expect more product pitches interrupting shows as cable operators roll out new systems for pop-up, interactive ads.